New York’s Attorney General proposed a bill Thursday that would protect and reward big bounties to whistleblowers who report fraud and other misconduct in the banking, insurance, and financial service industries.
Attorney General Eric Schneiderman said New York “has a unique opportunity to set the gold standard for states seeking to expose and hold individuals accountable for financial crimes.” Currently the state has no program or laws to protect or incentivize whistleblowers in the financial sector.
The proposed Financial Frauds Whistleblower Act would open the door to big whistleblower rewards with the intent of encouraging those who witness securities fraud and other wrongdoing within the financial industry to voice their concerns.
The legislation has a reward structure that is modeled like the whistleblower provisions of the False Claims Act and the Dodd-Frank Act, proposing that whistleblowers whose tips lead to more than $1 million in penalties or settlement proceeds are awarded up to 30 percent of the finances obtained as result of their tips.
Because the rewards would be paid out of penalties and recoveries and not out of state funds, the legislation establishes a cost-free way for New York to detect fraud and prosecute those who commit it.
The legislation would also guarantee the confidentiality of the whistleblower’s information and make it illegal for any employer to retaliate in response.
“From holding the banks accountable for the collapse of the housing market, to taking on unfair advantages for high-frequency traders, this office has committed to promoting fairness and a level playing field for all investors,” Mr. Schneiderman said in a statement, noting the present absence of any valuable tools for building such cases.
“This law will be the strongest, most comprehensive in the nation, and is long overdue for a state with the world’s most important financial markets,” Mr. Schneiderman said.